Looks like the Reserve Bank of India’s (RBI) repo rate hikes did not stop Indians from taking loans. As of February 2023, outstanding personal loans amounted to a little more than ₹40 lakh crore. This is a 20.4 per cent increase, compared to the figures in February 2022. Last year, at around that time, the outstanding personal loans in India stood at around ₹33 lakh crore, according to RBI data. 

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It is to be noted that between February 2022 and 2023, repo rates were hiked six times, from 4.4 per cent to 6.5 per cent. 

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Experts believe that the revival from the pandemic could have fuelled this. Krishnan Sitaraman, Senior Director and Deputy Chief Rating Officer, CRISIL Ratings, said, “Across various segments like home loans, vehicle loans, or credit cards, all of them have shown growth and that is all clearly linked to the fact that the economic activity has picked up, cash flows have been coming in, and people are borrowing.” 

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In the February that went by, outstanding vehicle loans saw an increase of 23.4 per cent, while home loans and education loans increased by 15 per cent and 16 per cent respectively.  

The rise in vehicle loans could also be because of an increase in automobile sales in FY23. The total number of vehicles registered in the CY 2022 is 2,15,17,921, a 14 per cent increase from CY 2021. 

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Education loans too are seeing an increase since Covid restrictions have eased. Outstanding education loans stand at ₹9.6 lakh crore in February 2023, and it was ₹8.3 lakh crore in February 2022. Sitaraman attributes this to more people going abroad to study. “There has been a steady increase in people going abroad to pursue higher education, especially STEM courses. Since their fees are higher, students borrow to pursue education, and we have seen an increase in education loans.” 

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Home loans have also seen a 15 per cent hike from around ₹16 lakh crore to ₹19 lakh crore in February 2023. Though home loans still form a major part of personal loans, their share has fallen. The share of home loans in personal loans was 49.8 per cent in February 2022, and it is 47.6 per cent this February. 

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Since the growth in the personal loans arena is greatly fuelled by the revival from the pandemic, Sitaraman said that there could be a fall in the growth rate next year. “If we are talking about retail loans, we do expect the growth to continue in FY24 but maybe somewhat slightly lower than last fiscal. The base effect will be there, but we don’t see any negative growth happening,” he said.